WWE earnings for Q4 impress Wall Street

February 13, 2017

WWE set a 52 week record for stock price as it announced its end of year earnings for 2016 this past Thursday.

According to its earnings call, WWE Network subscribers grew 14% to 1.41 million paid subscribers. Revenue increased 11% to a company record $729.2 million.

Per a company press release, “[T]he Company reported Net income of $8.0 million, or $0.10 per share, as compared to a Net loss of $1.2 million, or a $0.02 loss per share, in the prior year quarter. Operating income increased to $13.9 million from an Operating loss of $1.5 million.”

Notably, television rights fees saw a big year-to-year increase (i.e., 2015-2016).  The television division ended the 4th quarter with $68.6 million as opposed to $55.6 million in 2015.  The network was up $43.7 million to $40.8 million.  Overall, revenue was up across all business divisions except PPV which is likely since the Network is taking over this segment.

As of this writing, the stock is up at $22.37 which is slightly below its 52 week high of $22.56.

Payout Perspective:

The earnings reflect that business is good for the WWE.  It is capitalizing on television rights fees while its Network continues to grow according to the numbers.

WWE reports Q2 revenues

July 28, 2016

On Thursday, the WWE announced its second quarter earnings for the year.  Despite record revenues, the company’s Q2 profits missed expectations.

According to the WWE earnings call held Thursday morning, revenues grew 32% to a record $199M.  Profits are off due in part to spending which included Wrestlemania.

The WWE Network hit 1.52M average paid subscribers which is up 25% over Q2 last year.  The Network revenues generated $51.8M in revenues.  Per the WWE earnings release, the average monthly churn declined 20% to 9.9% for the first six months of 2016 from 12.3% for the comparable period in 2015.

The release of its earnings comes on the heels of a lawsuit filed earlier this month by over 50 former WWE performers related to head injuries.  S&P Global Ratings warned on Thursday that sports-related brain injuries are among the biggest new area for insurance claims.

Of the other numbers indicated in the earnings release was that live events were up from this time in 2015.  In 2016, live event net revenues were $51.9M versus $26.4M in 2015.  This is due in part to increased ticket prices.

Notably, there were no questions about Brock Lesnar and his failed USADA tests in the UFC.  Of course, this may not have a direct impact with the financials.  Then again, the fact that the information has surfaced that he was not subject to the WWE Wellness Policy which tests its performers for banned substances might raise questions.  In addition, a question about the UFC came about during the call.  Essentially, the WWE noted that the UFC is a private company and the sale reflected “the value people are putting on branded live content.”

 

WWE shows increase in revenues in Q1 of 2016

May 16, 2016

Last week the WWE announced its financial results for the first quarter of 2016.  The company increased its revenue by 13% on a pro-forma basis to $171.1 from $151.3 million in the prior year quarter.

The WWE Network averaged 1.29 million paid subscribers over the first quarter 2016 which is a 39% increase from the first quarter in 2015.  Per the WWE press release, it reached 1.47 million total subscribers at the end of the quarter.  It also states that the Network reached a record 1.82 million total subscribers immediately following Wrestlemania.

For the first time since the inception of the network, the WWE allowed consumers to potentially watch Wrestlemania (the company’s biggest event of the year) for free if they utilized the network’s #FreeWrestlemania promotion.  According to PW Torch, there were 112,000 trial subscriptions pre-Wrestlemania and 370,000 post-Wrestlemania.  There were 355,000 total additions over the weekend of Wrestlemania (March 31-April 4).

The total paid subscribers were 1.357 million with 1.027 domestic and 330,000 international.  The company projects approximately 1.5 million paid subscribers in the second quarter of 2016.

Net income rose to $13.9 million from $9.8 million a year ago.

Notably, the revenue for live events decreased 36% to $25.3 million although this number excludes the timing of Wrestlemania which occurred in the second quarter.

Payout Perspective:

From just an outsider viewpoint, it appears that the WWE stock is moving along well and its Network, which is the most interesting thing, is still showing signs of growth.  There might be a concern regarding the pro-forma reporting (excluding items such as restructuring charges or executive-based compensation) as it sometimes distracts investors from GAAP reporting as told by the Wall Street Journal.  While the concern of churn is always on everyone’s mind, the incremental growth should appease investors.

Lawsuit over WWE Network royalties promptly dropped by former wrestler

April 12, 2016

Former WWE wrestler Rene Goguen (fka Rene Dupree) has voluntarily dismissed his lawsuit against World Wrestling Entertainment.  The news comes just days after announcing it filed a class action lawsuit against the company for unpaid royalties related to the WWE Network and Netflix.

Goguen claimed breach of contract, breach of fiduciary duty, unjust enrichment and violation of the Connecticut Unfair Trade Practices Act.  The dispute arose out of what Goguen and his attorneys believed were a part of his Booking Contract that he was due royalties for “technology not yet created.”

WWE attorney Jerry McDevitt stated that Goguen signed a contract in 2011 “that destroys his ability to bring these types of claims” according to The Hollywood Reporter.  Aside from the contract, THR pointed to a case which states that state-based rights of publicity are trumped by the federal copyright act.

Goguen Dismissal

Payout Perspective:

The voluntary dismissal obviously means that Goguen’s attorney realized that they did not have a legal shot at surviving a motion to dismiss.  This probably stems from the contract alluded to by McDevitt.  It likely was a waiver of claims related to the WWE Network and Netflix.  One might infer that when the WWE contemplated the Network, ensuring that all performers under contract pre-network would not be able to claim royalties was a necessity to mitigate these types of claims.  The WWE’s lawyers are very aggressive when it comes to legal strategy and one might surmise that the WWE would have sought legal fees from plaintiffs’ attorneys.

Former WWE wrestler sues over royalties from WWE Network

April 8, 2016

Former WWE wrestler Rene Goguen (wrestling under the name Rene Dupree) sued the WWE Wednesday in a class action lawsuit filed in Connecticut federal court.   The former WWE superstar is claiming he is owed royalties from the WWE Network and Netflix due to a clause in his contract which pre-dated the over the top platforms but stated he was entitled to royalties of “technology not yet created.”

Goguen is claiming breach of contract for failing to pay royalties, breach of fiduciary duty, unjust enrichment and violation of Connecticut Unfair Trade Practices Act.

Goguen believes his Booking Contract, which was attached to his Complaint, entitled him to WWE Network and Netflix licensee sales of WWE Video Products due to a vague clause which left open for him to be entitled to royalties for “technology not yet created.”  He claims he was not paid these royalties.

The WWE told the Hollywood Reporter that Goguen signed a contract in 2011 that negates his ability to bring his claims.

Payout Perspective:

In all likelihood, the WWE will attempt to dismiss this case.  If the WWE is correct, we might assume that Goguen signed an agreement that precluded him from filing this type of lawsuit as the WWE probably contemplated the clause might open itself up to royalties.  The 2011 contract referred to by the WWE likely indicated he would not be entitled to any network royalties or any from WWE content on Netflix.  The bigger issue might be how the WWE splits royalties among its current roster for the network.  When C.M. Punk left, he claimed that many wrestlers did not know how the WWE would address royalties in light of the fact that some wrestlers made points off of PPV buys.  With the almost extinction of PPV, its clear that royalties from the WWE would be big for wrestlers.  We will see how Goguen’s case is handled and whether this raises any issues for WWE contracts moving forward.

WWE Network subscriptions set records for WM 32

April 4, 2016

The WWE announced a couple records related to Wrestlemania 32 Sunday.  On Monday, it announced that the WWE Network reached 1.82 million total network subscribers according to a telephone conference held by the company.

WWE Network reached 1.39 million total domestic subscribers and 434,000 international subscribers.  The gains over last year at this time (the day after Wrestlemania) improved by 39% and a gain of 1.3 million subscribers at the end of the fourth quarter of 2015.

In addition, the WWE announced that Wrestlemania 32 set a new attendance record of 101,763 at AT&T Stadium in Dallas.  The previous Wrestlemania record was at the famous Wrestlemania 3 in 1987 which drew 93,173 for Andre the Giant vs. Hulk Hogan.  Obviously, there is some skepticism about these numbers.

While stock shares were up slightly on Monday, there was a sharp decrease in shares with the stock down 7.3% at one time after the WWE telephone conference announcing the subscription number Monday afternoon.

During the telephone conference, a question was asked about subscriber “churn” with the network.  The response was that more content would help with retention of subscribers.  Although questioned, the WWE did not comment on the conversion rate of its free trial promotions.  The company had released retention rates for its first two trials but have not provided information since.

Payout Take:

It’s important to note that the 1.82 million subscribers announced includes paid and those on a free trial.  The actual total paid is 1.454 million.  The company has embraced the free month models for a variety of reasons although it has its obvious risks.  The paid subscription numbers must have disappointed investors (or people selling off the stock) as WWE shares were down after the telephone conference.  It did rebound in after-hours training.  We will see how the stock does in the next couple days.

WWE touts #FreeWrestlemania to attract new viewers to Network

April 3, 2016

The WWE’s annual biggest event of the year is today as Wrestlemania 32 takes place at AT&T Stadium in Dallas, Texas.  This year, the WWE Network is offering a free month including this today’s event.   The strategy seems to be contrary to WWE’s goal for profit but at least one analyst believes its a positive calculated risk.

Interesting enough, in 2013 pre-WWE Network, the WWE raised its PPV price point to $70.  In 2016, you can access the WWE Network for free and watch the company’s biggest day of the year.

The ability to watch Wrestlemania for free through its Network is not a secret, in fact the WWE has been aggressively marketing it on social media using the #FreeWrestlemania and #WhatAreYouWaitingFor hashtag.

In a post by Brandon Ross, on the BTIG web site, he evaluates the WWE’s risk of giving away the event for free and how it might impact the company’s business.

First off, for those not familiar, the WWE offers its Network for $9.99 per month.  However, it continually runs a promotion in which new subscribers may access the network for free for one month with the hope that the subscribers likes what they see and continue on with the network.  Also, now former subscribers (previously purchased the network and want to re-up) can access a free month if they have never previously taken advantage of the free month promotion.  There has been criticism about this program since it is fairly easy to take advantage of the system by basically using a new email address.  The article indicates that the WWE has tightened its authentication system to prevent this from happening.

Despite the distinct possibility that the WWE would be losing profits from its Network by giving away Wrestlemania, Ross believes that it is a “smart, calculated risk” for three reasons.  First, he likes the idea of free trials as it’s a way for a potential subscriber to “test drive” the product.  Second, most of the U.S. fans have tried the network and those that have previously subscribed to the WWE and are coming back are paying.  Third, in international markets the WWE advertises the network via social media and the company should leverage its presence to promote the network to international fans.

While there are inherent issues with a free trial for a month, the WWE reported strong conversion rates in its first two trials.  It has not reported conversion rates since the first two but the inference here is that if the “free month” was not successful in converting subscribers then it would not continue with the promotion.

The question of “churn” is always a question with the network.  Chris Harrington has done an excellent job in following the quarterly churn.  In its quarterly calls, WWE has announced a total subscriber number but the number has to be analyzed a bit to determine the amount of new subscribers versus those that discontinued their subscription.  Ross indicates that while it is unknown whether the WWE will announce its total subscribers, paid subscribers or both that they will be interested in the total number (free and paid).  The total number, according to Ross, will provide insight into the “longer-term opportunity of the network” as opposed to the paid subscriber number.  Ross estimates that the Network should hit over 1.8 million subscribers when looking at free and paid combined for Wrestlemania.

Payout Take:

The WWE’s strategy to allow the possibility of fans to access the Network to watch Wrestlemania for free is a risk as Ross identifies.  In comparison, the UFC allows a 7 day free trial for its Fight Pass digital platform.  However, returning subscribers that have cancelled Fight Pass and want to renew do not have the opportunity for the free trial again.  The shorter time frame to sample the product plus the tighter restrictions seems like the better strategy to capture the maximum amount of potential revenue for its platform.  Although no numbers are available, it appears that Fight Pass is doing better than the WWE.  This could be attributable to the broad availability (domestic and international) of Fight Pass.  UFC is coming off one of its most successful days for Fight Pass with UFC Fight Night 84 from London.  Again, no numbers since the UFC is private, but you may infer that the company picked up a lot of subscribers for the event.  Also, Fight Pass offers three distinct tiers to subscribe with the less expensive tier being an up-front payment for 12 months.  So, instead of the WWE’s model of paying while you go, the UFC will get the money first even if you tail off from watching.

The WWE actually embraces the opportunity to promote a free Wrestlemania.  One would believe that it is hoping that its vast social media assets will appeal to the international markets that have yet had the opportunity to watch the network.  Also, you would think that its conversion rates are acceptable at this point that it is willing to give away the most-watched event of the year for the company.

We will see how the numbers turn out.

WWE and Snapchat announce multiyear partnership

April 1, 2016

Variety reports that World Wrestling Entertainment and Snapchat have signed a multiyear deal that will start this Sunday at Wrestlemania.

The image messaging app will produce and distribute Live Stories from Wrestlemania and other events.  According to Variety, “WWE fans will be able to contribute video and photos that will be curated and packaged by Snapchat along with WWE-supplied content into a brief video available to the app’s more than 100 million daily active users.”  Snapchat will cover other WWE live events throughout the year.

Payout Perspective:

This partnership is a push by the company to reach out to a younger demographic as those that use Snapchat tend to skew on the younger side.  It is also a way for the WWE to reach out to fans on other social platforms such as Facebook, Twitter, YouTube and other digital channels.  The article also indicates that one of the other big pushes is for this partnership to help bolster the subscription base of the WWE Network.

ESPN to provide coverage at Wrestlemania

March 30, 2016

ESPN will be airing “SportsCenter” live from Wrestlemania this Sunday taking place at AT&T Stadium on Sunday.  It will also feature live cut-ins throughout the day.

The move is a “specific content play” as the network attempts to appeal to ESPN viewers that also are WWE fans.  The network had been featuring WWE in segments which now lead up to Sunday’s WrestleMania.  This past Monday, ESPN anchor, and former WWE announcer, Jonathan Coachman made a guest appearance on Monday Night Raw to promote the event.

This past January, ESPN also featured Lucha Underground stars to promote its return to the El Rey Network.  Last year it aired from the Barclays Center in Brooklyn where Summerslam took place.

(H/t via Sports Business Daily)

Payout Perspective:

The coverage is good for the WWE and promotes its network.  It reflects the fact that ESPN is attempting to broaden its reach.  While pro wrestling is considered “sports entertainment” and not purely sports, ESPN will be giving it the coverage like any other sport.  It’s clear that it is a ratings-grab which the WWE does not mind at all.

WWE stock downgraded a day after Q4 earnings announcement

February 12, 2016

The WWE posted strong fourth quarter earnings as revenue increased 21% to $658.8 million, the highest in Company’s history.  However, that was not enough for investors as the stock was downgraded a day after the earnings announcement.

The WWE reported a net loss of $1.2M adjusted for non-recurring costs which equated to a profit of 4 cents per share.  While the WWE beat analyst expectations, it took a hit as the stock was downgraded to a ‘Hold’ from a ‘Buy’ by The Street Ratings.

The WWE Network reported 1.22 million paid subscribers at the end of Q4.  It was a 49% increase from 2014 Q14.  The WWE announced that it was the fifth largest direct-to-consumer OTT subscription service in the U.S. next to Netflix, Amazon Video, Hulu and MLB.TV.  The WWE Network continues to expand internationally as it extended its reach to Germany, Austria, Switzerland and Japan with plans to expand into the Pacific Rim .  It announced 277,000 international subscribers.  This means that there was roughly 940,000 domestic subscribers and 277,000 overseas.  According to Chris Harrington of The Wrestling Observer, there were 389,000 additions although there was a churn of 405,000 subscribers.  But this quarter showed the most international subscribers since the network was offered internationally.

In January, the WWE was added to the S&P SmallCap 600 Index.

The 4th Quarter for 2015 brought the annual revenue is up 21% from the previous year.  Per Harrington, the operating income and net income were the highest since 2013 but below the profitabil8ty of the 2007-2010 traditional PPV era.

The stock was down slightly after yesterday’s trading and was down once again on Friday to $14.65.

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